E-Commerce

The consensus Internet role in the businesses of jan/san distributors has changed drastically over the span of only a few, high-tech-intensive years. You know the drill: The Internet streamlines business processes, improves operating efficiencies, cultivates new markets and lowers supply chain costs. You make money. If e-commerce was that cut-and-dried — and easy —we wouldn’t be talking about the e-frenzy in the past tense. The Internet has potential to deliver on its promises, but distributors are finding that some of the bells and whistles touted as “necessary,” aren’t. Internet buyers just aren’t dictating the need for the level of engineering some sellers have invested in their websites. The jan/san industry, traditionally behind in adopting new technologies, is no exception.

The Panic Subsides
“It’s a slow go,” says Richard Renert, vice president of Eastern Paper of New England, Hamden, Conn. Eastern Paper has been transacting online with customers for less than two years, and is doing its best to get customers to embrace the concept. “I think people are interested but there’s a little bit of apprehension. They’re not used to the format, and some that are set up online right now have not used it yet. It’s going to take a little bit of time. It’s going to take a little bit of hand-holding.”

People are approaching business transactions on the Internet more cautiously. Business-to-business transactions are evolving at a more conservative pace than consumer transactions did. In fact, the extent to which consumers embraced buying online may have swept the former into a “build-it-and-they-will-come” sense of urgency. That said, the Internet is not going away. According to IDC, a Framingham, Mass.-based provider of technology intelligence and industry analysis, worldwide business-to-business commerce will top $2.6 trillion by 2004 — up from $280 billion in 2000.

“E-marketplaces are becoming evolutionary, not revolutionary: the people who are going to drive this are the ones that already have relationships with buyers and suppliers — we call them distributors,” says Richard Villars, vice president of Internet and e-commerce strategies at IDC.
That statement is music to the ears of many readers, some of whom have invested a lot money and time in an e-commerce strategy, only to find that their customers are slow to adopt.

Unlimited Possibilities
The sanitary supply industry is not alone in the wide gap between sizeable online investments and subsequent sales revenues that can be traced directly to the investment. According to the 2000 State of Sales and Marketing Technology Study, sponsored by Sales & Marketing Management, only 12 percent of the sales and marketing executive respondents indicated that advanced online technology investments had a significant impact on online sales revenue. Approximately 41 percent of the respondents said advanced online technology had no affect on sales volume.

Can one conclude, then, that the Internet has lost some of its attraction, especially among business users? Not really. But, before you rush off and invest thousands of dollars in the latest transaction software, take a moment and reflect on the fact that “e-business” and “e-commerce” should not be used interchangeably — especially if you’re thinking of investing in an “e-commerce”-heavy website.

It’s safe to say that “e-business” is very much alive and well. Customers e-mail orders, or browse for product information on your website before they call you to buy. Similarly, the investment is marginal, while the efficiency gains are akin to any other technology we’ve adopted over the past 25 years.

The state of e-commerce is another story. Build a site designed to accommodate seamless, automated business-to-business sales transactions, and you’re not guaranteed that people will necessarily come. True e-commerce requires, in most cases, complete system integration with little or no human contact — an order is entered by a customer and goes right through the site to the distributor’s back end computer where it’s processed, an invoice generated, and the transaction documented after it is picked and sent. It can also involve numerous other functions — like targeted marketing — designed to make sales most efficient. On the other hand, if a distributor is receiving the order, printing it out and going about filling the order using normal methods, the Internet-related cost savings are minimal.

In a recent Sanitary Maintenance survey, 80 percent of the readers indicated they have websites. Forty-six percent also said they have sold products over the Web. In many cases, it’s safe to conclude that “selling products over the Web” can mean different things to different website investors. And the closer you get to a completely automated transaction — with minimal human contact — the more expensive the investment becomes.

So, “selling online” can mean different things to different companies. At the very least, the resident Internet strategist at your company must appreciate the varying levels of sophistication that define Internet sales transactions. Do you want to completely automate your sales system? Are “people” a critical aspect of your sales philosophy? Can you get away with dipping your toe in the water before you plunge, head first, into some pre-conceived notion of what it means to “sell” online?

And, if you’re the person in charge of putting together an online strategy, make sure you and your boss are reading the same page. Make sure he’s not hearing “e-commerce” when you’re pitching “e-business.”

So if we’re in the middle of an online sales transaction evolution — not a revolution that requires rethinking your entire approach to sales or making staggering investments in technology — what can we make of the pace?

“Five years from now, the Internet will be a common, but not dominant, method for receiving orders,” says Adam Fein, Ph.D., president of Pembroke Consulting, Philadelphia, and a leading expert and author in marketing and distribution in many U.S. industries. “But it’s important to keep things in perspective. Online ordering will not mean the death of the sales rep. Instead, online services will provide customers with an alternative way to communicate with distributors.”

Cautious Acceptance
“What we’re seeing now is that there are some customers who are going to want to order over the Internet. It’s supplemental,” says Gregory Kravitt, a professor of e-commerce strategies and founder of Joraco Inc., a consulting firm in Deerfield, Ill. “It has the ability to lower the transaction costs and that’s what’s so attractive about it. Don’t look at it as a single solution towards which everything is going to migrate. There are certain aspects about it that are very exciting, but people are people — some don’t feel comfortable with it.”

But will this technology land distributors more business? It’s hard to say, says Bruce Merrifield, of Merrifield Consulting Group, Chapel Hill, N.C. He is skeptical of the increased business the Internet will yield for distributors in the near future. “Over time distributors will add it because it’s an icing-on-the-cake sort of thing.” He again stresses the supplemental role the Internet will play for already-established businesses. It will only be the ordering method of choice for a certain number of customers.

There will always be those customers who want human interaction, says Kravitt. “Some people will kick and scream and they won’t change, and others will learn the efficiency and speed of using it.”

Kravitt stresses, though, that this is a mere supplement to business, and will never replace solid business practices. “It’s like a drive-through window. It’s not going to serve all your customers, but it has been shown to increase overall volume. It’s just another convenience you can make available to your customers.”

This evolution of the Internet is following the same path of acceptance that many other technologies have in the past.

“Right now, we’re in the trough of disillusionment,” says Merrifield. He says that in the life of every new technology there is a period when it first comes out that everyone clamors to embrace it thinking it is a panacea to all their business’s inefficiencies. When people realize it’s not a panacea, and all the pioneer companies fail, there’s a period of time before the technology again becomes mainstream and is used extensively.

The failure of some of the much-touted consumer sites has had an influence on the rest of the business world, but those failures were normal and a result of documented business cycles, says Larry Plesent, president of Vermont Country Soap Corp., Middlebury, Vt. “The pioneering companies get out there and blaze a trail, then the next ones come up and do it again. Usually by the fourth or fifth time they succeed and by that time nobody’s pioneering. That is a very time-proven entrepreneurial cycle.” In 30 years Internet ordering will be commonplace, says Plesent.

“So it will happen,” says Merrifield. “It’s just a lot further out than the hype would have had us think. But there’s lots of little things you can take advantage of along the way, like Web services that take away a little bit of pain, or soup something up and provide a little efficiency.”

And Kravitt warns that complacency is dangerous in the current Internet environment.

“A lot of companies have taken solace in the fact we’re going through the Internet winter,” he says. “They initially thought this was an absolute priority, and this proves to the world that everyone’s not moving on this too quickly. But if I sit on my hands, I’m inviting competitors to develop a competitive advantage. That doesn’t mean you have to pour all your resources and people into getting on the Web, but I think it would be unwise to not move forward and get a Web presence.”

Make It Count
One of the biggest mistakes distributors make when formulating an e-business or e-commerce strategy is the fact they neglect to form any strategy, says Steve Epner of BSW Consulting Inc., St. Louis.

“Most people jump into e-business without knowing where they want to go with it so 99 percent are surprised or disappointed because they wind up somewhere they don’t expect,” he continues. Distributors need to ask themselves whether they have customers that are asking for online ordering capabilities, or if there are other good reasons for making the investment. “If you’re doing it just because your neighbor is doing it you’re not necessarily going to be happy with the result.”

Until you can answer the question, ‘why e-commerce,’ strategically, anything you do will probably be wrong, says Epner.

Kravitt agrees. He says that distributors need to give customers what they want, and nothing more.

“I think to begin with they should be thinking not of themselves in isolation, but rather in the context of the supply chain. By that I mean they should think about whether everybody is ready for it as well,” he says.

Before settling on any e-commerce plan, ask yourself whether you want your company to grow or to maintain the size you’re at, Epner suggests. Do you want to sell more to existing customers, or do you want to attract new customers? What are your geographic limitations?

“If I only want to sell within a 100-mile radius, then in my marketing plan I want to address that, and I want to be clear that if you’re not in that range, I don’t want to waste your time — I’m not going to sell to you. You strategically have to know where your business is going before you start doing all this other stuff,” Epner says.

“The first thing is they need to make a commitment to the medium,” says David Miller, president of Avidxchange, an Internet software company based in Charlotte, N.C. “They have to treat it as an opportunity — a long-term opportunity. It requires a plan, discipline and patience.” Miller says that nothing is going to happen overnight and that distributors need to be prepared to view the long-term benefits to the company. “Maybe you won’t have immediate sales,” says Miller, “but you’ll have immediate experience. If you’re going to do this you have to be committed to doing it.” Miller also wants distributors to understand that this is a technical commitment, and stresses that integration and maintenance should be important considerations in any Internet decision-making.

Oh, the Possibilities
The all-encompassing Internet playing field is immense. Any service you would like or would like to offer your customers is available for a price including marketing, selling, recruiting, warehouse management, and every other automated tool or software you can imagine.

“There are firms that will sell you any part of the process you want,” says Epner. “Each potential user must step back and first determine what it is they want to accomplish. Few do this. That is why there are so many failures.”

Choosing the right set of capabilities for your business should be a multi-step process, agrees Jake Davenport, president and chief developer for Webmaster, a Web development consulting firm in Des Plaines, Ill.

“Look at the interactivity, the look and feel, and how does this plan fit into your existing mission,” he says. “They should do an internal needs assessment and survey their customers. They better build something the customers want or they’re not going to use it and they’re going to waste a lot of money.”

Davenport suggests constructing a functional outline that describes each expectation the distributor has. “They’re building a product specification that should outline features that they think their client base is going to want,” he says.

Get Your Feet Wet
Distributors shouldn’t wait to test the Internet’s waters, says Miller. “This train’s coming,” he says, “and the ones who gain the early knowledge will know what to do when the market really takes off. You can’t really point to when you said, ‘Hey, I really couldn’t live without the Internet or e-mail.’ People with the experience are going to do better, and the time to get started is now.

“Learn about it and absolutely test the waters. There’s no question this is the way things are going to be done in the future. The opportunity is enormous for companies that act early and aggressively when they figure out which strategy works for them,” Miller says.

“My best advice is don’t think of it as an either/or,” says Kravitt of the Internet. “Think of it as a supplement, not a panacea and not the only solution. Build a time schedule and a very strong plan for establishing a presence on the Internet. Don’t use the recent slowdown as an excuse.”
Merrifield is a bit more reserved in his vision of the Internet’s role in businesses of the future. Though he sees its efficiencies, he questions how extensive they will actually be — especially in the near future.

“If I create a Web order capability, am I going to get more customers globally?” he asks. “The problem is that I’m still going to call, I’m still going to need to pick it up at times. The products are time and price sensitive.” Merrifield wonders whether distributors will maintain the same number of customers, and merely perform more transactions. “Maybe you’re going to kill yourself with small orders,” he says.

But, he concedes, 70 percent of the questions inside salespeople field are simple, order-status type information. If customers had access to their own accounts 24 hours a day, 7 days a week, a lot of the salespeople’s information-relaying duties would evaporate, Merrifield says, and they would be free to do more worthwhile things.

And Internet technology will only be a part of the technological revolution we’ll experience in the next six to eight years, says Merrifield. After we emerge from the “trough of disillusionment,” many new services will pop up and the employee makeup of businesses will change accordingly. Partner relationship management (PRM) will play a role in the business relationships of the future, Merrifield says. Manufacturers will collect and monitor customer leads through their distributors.

“You’ll start to see the manufacturers spend the money and roll those applications out one at a time.”

Succeed at B-to-B
“If a distributor doesn’t at least have an informational website, they’re in big trouble because they’re well behind the competition,” Davenport says. “Even if it’s just entry-level, they should have some type of e-commerce system in place.” He says the customer wants ease-of-use, speed and easy access. “It’s to the distributor’s benefit to provide order-taking 24 hours, 7 days a week, as well as account access that doesn’t require human interaction.” Davenport says this is the direction in which every industry is headed.

The cost to experiment with this technology is high, he says, but distributors shouldn’t make the mistake of gambling — and gambling cheaply. Throwing something up on the Net without thought, effort or money is a mistake, Davenport says. “If you’re a corporate entity you should invest as much in your website as your other marketing materials.”

Kravitt says distributors have a great opportunity for success in the e-commerce arena, since business-to-business commerce is expected to be such a lucrative part of the Internet economy of the future.

“B-to-b is going to be the greatest success story the Internet has to offer,” says Kravitt. “Again, if you want to know why, you don’t have to be a rocket scientist. Just look at the transaction costs.”

A New Dial Tone
For the distributors that have already purchased e-commerce software, there will undoubtedly be some lag time before customers really grow accustomed to using it and liking it. However, there are a number of services you can provide online that are attractive to customers, and the flow of traffic should continue to grow in coming years.

“We know the Internet is becoming the new dial tone,” says BSW’s Epner. “This is how the next generation is going to communicate. They don’t use the telephone. We better start understanding how we’re going to use this to deal with our future customers, suppliers and business partners. When there’s a trigger, there’s going to be a sudden and fast movement to doing things online.”

There are some things distributors can do in the mean time like including information on a website about product lines and availability. That’s extremely valuable, says Davenport. “If you take all the information that’s valuable and pertinent and supply it on your website you have an infinite amount of information that keeps your customers coming back. They have more incentive to continue to maintain a relationship with that company.”